Behind the ongoing conflict between the Ethiopian government and its regional state of Tigray and the Tigray People’s Liberation Front (TPLF), are the Western free market reforms, and pressure for Ethiopia to cut its ties to China. While Ethiopian Prime Minister Abiy Ahmed is by no means cutting ties with China, he has nonetheless adopted the reform agenda which the United States, the United Kingdom and the European Union have been demanding. These reforms include privatizing state companies, opening up the telecommunications and financial sector to foreign investment.
Abiy’s promise to implement the reforms, led the World Bank to grant $9 billion in loan commitments in 2019, the highest amount allowable. As part of the privatization process, the government issued bidding to mobile phone licenses that would end the government monopoly. The first license was won by the British company, Vodafone, and two of its African subsidiaries, Safaricom and Vodacom. They beat out a bid by a consortium led by the South African telecom MTN which was backed by the Chinese Silk Road Fund. While the MTN bid was $600 million, Vodafone was able to bid $850 million because it received a loan of $500 million from the U.S. government’s International Development Finance Corporation (DFC). All the media said the intention was to beat out the Chinese. While that could be bad enough, the loan constitutes one-quarter of the DFC’s loan portfolio this year, which is going to a British company that has no investments in the United States. The money will most likely not get to Ethiopia because it will probably have to be used to service debt. Since Ethiopia’s state mobile phone company functions quite efficiently (with Chinese technology), the Vodafone takeover is no big plus for the country’s development when the $500 million could have been spent on real infrastructure. Like all these private mobile phone operations, it is little more than a cash cow. There will be another license offered for bidding, which the Chinese-backed consortium could win, if they are still interested.
